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The Griswold family competes in a game show called Pig in a Poke and wins an all-expenses-paid trip to Europe. In a whirlwind tour of western Europe, chaos of all sorts ensues. They stay in a fleabag London hotel with a sloppy, tattooed Cockney desk clerk (Mel Smith). While in their English rental car, a yellow Austin Maxi, Clark drives the family endlessly around the busy Lambeth Bridge roundabout for hours, unable to maneuver his way out of traffic. His tendency to drive on the wrong side of the road causes frequent accidents, including accidentally knocking over a bicyclist (Eric Idle), who reappears throughout the film. At Stonehenge, Clark backs the car into an ancient stone monolith, toppling all the stones like dominoes, (except for one) which they do not even notice as they happily leave the scene.

In Paris, the family wears stenciled beret caps, causing Rusty to be teased by young women at the Eiffel Tower observation deck. Clark offers to get rid of the beret for Rusty, but when he throws it away, another visitor's dachshund mistakes it for a Frisbee and jumps off the tower after it. Later, Rusty meets a prostitute at a bawdy Paris can-can dance show. The family's video camera is stolen by a passerby whom Clark had asked to take a picture of the family. Clark also manages to insult every native citizen with his terrible French.

Next, in a German village, the Griswolds burst in on a bewildered elderly couple (Willy Millowitsch, Erika Wackernagel), who they mistakenly think are relatives but who end up providing them dinner and lodging anyway, not being able to speak each other's language. Clark manages to turn a lively Bavarian folk dance stage performance into an all-out street brawl, after which he, while fleeing hastily, knocks down several street vendors' stands and gets their Citroën DS stuck in a too-narrow medieval archway.

In Rome, the Griswolds rent a car at a travel office, but unbeknownst to them, the men in charge are thieves, holding the real manager captive. The lead thief (Victor Lanoux) gives them a car with the manager in the trunk, claiming he lost the trunk keys. The next day Ellen is shocked to discover that private, sexy videos of her from the family's stolen video camera have been used in a billboard advertising a pornographic movie, leaving her completely humiliated. After screaming angrily at Clark (who had told her he had erased the video), Ellen storms off to their hotel, where she encounters the thief who rented them the car. She confesses her recent troubles, still unaware that he is a criminal. The man then tries to get the car keys, which are in her purse, but fails. When the police arrive at the hotel, he kidnaps Ellen, prompting Clark to rescue her. On the flight back to the U.S., Clark accidentally causes the plane to knock the Statue of Liberty's torch upside down.

The film opened July 26, 1985 in 1,546 North American theaters and grossed $12,329,627 its opening weekend, ranking number one at the box office.[3] After its initial run, the film grossed a total of $49,364,621 domestically.

Review aggregation website Rotten Tomatoes gives the film a score of 38% based on reviews from 21 critics, with an average of 4.7 out of 10.[4]

Janet Maslin of The New York Times thought positively of the film stating, "While it's very much a retread, it succeeds in following up the first film's humor with more in a similar vein." She added, "The film's best visual humor arises from the mere juxtaposition of European settings with the funny hats, T-shirts and soda cans with which the Griswalds announce their presence."[5] Entertainment magazine Variety gave the film a negative review explaining, "As the family of characters cartwheel through London, Paris, Italy and Germany - with the French deliciously taking it on the chin for their arrogance and rudeness - director Amy Heckerling gets carried away with physical humor while letting her American tourists grow tiresome and predictable. Structurally, the film unfolds like a series of travel brochures."[6]